The Inside Story of Ari Emanuel’s Big, Risky WME-IMG Merger

When Ari Emanuel, the 53-year-old co-C.E.O. of the powerhouse talent agency William Morris Endeavor (known as WME), wants something, he doesn't quit until he gets it. Generally seen as the inspiration for Ari Gold, the crass, overbearing talent agent played by Jeremy Piven on the HBO series Entourage, Emanuel is known for in-your-face tactics that are extreme even by Hollywood standards. CBS president and C.E.O. Les Moonves, who describes himself as “definitely a fan” of Emanuel's, says, “He is relentless to the point of ‘Ari, stop calling me. I'll make my decision when I make my decision.’ ” Moonves tells of a recent negotiation over the television show Extant: “We just recently picked it up for a second year, and Ari called me once a day for, like, three weeks. And it was like ‘Ari, I'll tell you when it's ready. I will tell you when I'm ready,’ you know. ‘Well, how are we doing? Are we close? Are we lukewarm? What's the situation?’ ”

For many years Emanuel's most enduring obsession was to combine his talent agency, whose clients include movie and television stars such as Ben Affleck, James Franco, and Oprah Winfrey, with IMG, the sports-entertainment-and-marketing giant that has worked with such elite athletes as Arnold Palmer, Jack Nicklaus, Tiger Woods, Pete Sampras, and Martina Navratilova. Emanuel's quest to own IMG began in earnest in the summer of 2004, when he and others had dinner with private-equity mogul Teddy Forstmann at the fashionable (now defunct) Midtown Manhattan restaurant Davidburke & Donatella, according to a former Forstmann partner. The two men discussed how Forstmann's firm, Forstmann Little & Company, might make an investment in Emanuel's agency, Endeavor, as it was called before it merged with William Morris. A term sheet was drawn up, but the deal went nowhere.

Forstmann—himself a larger-than-life character, just as passionate and mercurial as Emanuel—also nursed an obsession to own IMG, which was then still controlled by its founder, Mark McCormack. An amateur golf player, McCormack had begun the firm to help his friend Arnold Palmer and other professional athletes earn extra money by endorsing products and adding their star power to corporate marketing campaigns. Forstmann thought IMG was amateurishly run but full of potential. “They had a hell of a franchise that they weren't really taking advantage of,” he told me in a December 2010 interview in his posh office in Manhattan's G.M. Building. “This company had never used the word ‘profit.’ Mark liked to end the year at zero. He wanted to take the last $20 or $25 million. None of these people knew what the other guy did. It was … I'll use colorful language … It was the most fucked-up company I've ever seen in my whole life by a long shot.”

McCormack had no desire to sell, however. “How I got the deal was he died,” recalled Forstmann bluntly. During Forstmann's negotiations with McCormack's estate, Forstmann and Emanuel kept talking, and before Forstmann closed the deal, for $750 million in cash, in November 2004, the two men considered the possibility of IMG's also acquiring Endeavor, with Emanuel running the combined company. When that did not come to pass either, an incredulous Emanuel is said by a Forstmann insider to have proclaimed that the merger would be happening and that he was, in fact, going to be the C.E.O. of the combined company. Such exuberance left Forstmann nonplussed and a bit miffed.

Over the next decade Forstmann transformed IMG into an international production-and-packaging powerhouse. The expanding business cut profitable deals with more than 200 American college and university sports teams, as well as with Indian Premier League cricket, Wimbledon, the Australian and U.S. Open tennis tournaments, tennis tournaments in Spain and Malaysia, and Barclays Premier League soccer. It ran Fashion Week in New York, Milan, and London, and in China it formed an exclusive joint venture with the national television network to create sports programming—all this in addition to representing such sports stars as Novak Djokovic, Maria Sharapova, and Venus Williams. It also signed up an array of fashion designers and models, including Michael Kors, Diane von Furstenberg, Gisele Bündchen, and Kate Moss.

Forstmann's high-profile deals made Emanuel want IMG more than ever. According to a June 2009 article in The New York Times, he had been “spending time” with Forstmann in Los Angeles “on the golf course and off,” and speculation heated up again that somehow IMG and WME would be combined. But Emanuel still could not crack Forstmann. Explains Irving Azoff, a longtime media executive and former IMG board member, “When Ari started befriending Teddy, Teddy said, ‘Maybe I should hire Ari and [his business partner] Patrick [Whitesell]. I could give them each $500,000 and a few points of stock.’ I don't think he ever saw Ari as the grand wizard.”

In addition, Forstmann had little taste for Emanuel's specialty—representing talent—where fees are generated for negotiating television, movie, music, and book deals on behalf of clients. Forstmann supposedly told Emanuel, “You are in the barbershop business. The only way you grow your revenues is you get another barber to work for you, and he cuts 10 haircuts today.”

One longtime associate of Forstmann's claims he would never have sold IMG to Emanuel: “He once told me the only good thing that Ari ever gave him was advice about his love life.”

“YOU ARE IN THE BARBERSHOP BUSINESS,” FORSTMANN TOLD EMANUEL. “THE ONLY WAY YOU GROW ... IS YOU GET ANOTHER BARBER.”

Ironically, just as had been the case with McCormack, a sudden deterioration in Forstmann's health changed the calculus. In early 2011, not feeling well, he went to the Mayo Clinic, where he was diagnosed with glioblastoma, the same virulent form of brain cancer that killed Teddy Kennedy. Soon sharks were circling, figuring correctly that when Forstmann died the company would again be for sale.

Terry Semel, the longtime head of Warner Bros., had earlier tried to buy it. “I couldn't get him to leave the goddamned building,” Forstmann told me. Then, as I wrote in the January 2012 issue of Vanity Fair, onetime Creative Artists Agency (CAA) head Michael Ovitz—a friend Forstmann had tried to help out during a difficult career period by putting him on the IMG board—allegedly tried to organize a coup. But when Forstmann found out about it Ovitz and three of his supporters were tossed off the board. Emanuel came calling again, too. “He would have paid anything for it,” says someone aware of Emanuel's final discussion with Forstmann. But Forstmann again declined to sell.

Not until May 2014, more than two years after Forstmann had died, did Emanuel prevail at last in his quest to own IMG, with an all-cash $2.4 billion bid that overwhelmed every other serious suitor. But as Truman Capote liked to say, quoting St. Teresa of Avila, “More tears are shed over answered prayers than over unanswered prayers.”

Entourage Emanuel

Emanuel comes by his ferocious tenacity honestly. As a child he was the black sheep in an illustrious family of over-achievers. His brother Rahm would become President Obama's first chief of staff and is now the mayor of Chicago. His other brother, Zeke, is a Harvard-educated oncologist, author, bioethicist, and former White House health-policy adviser.

As a child Ari was dyslexic and suffered from attention-deficit hyperactivity disorder. He fought frequently with classmates who teased him. When he was in high school, his parents put him in therapy for a year and sent him to a special reading teacher for an hour and a half each day after school. Sitting at her dining-room table, he would cry as he tried to read, but ultimately he concluded from the experience that “nothing is too daunting.”

One of Emanuel's first jobs was to work for the New York talent agent Robbie Lantz, who had an astonishing stable of important clients, from Bette Davis to James Baldwin to William Rehnquist. My literary agent, Joy Harris, who then worked for Lantz and now runs her own literary agency, recalls Emanuel as “cocky, ambitious, and arrogant. Oh my God, this kid, you wanted to pinch him on one cheek and slap him on the other.” He was there for less than a year. “He learned what he had to learn and got out,” Harris says. “It was a quick step.”

Like many other aspiring agents in Hollywood, he first worked in the mailroom, at CAA and then at International Creative Management (ICM), where by 1995 he was a senior agent. That same year, after being hit by a car and ending up facedown on Wilshire Boulevard with broken ribs and a torn A.C.L., Emanuel had an epiphany: “Take advantage of each day that's given to you, and do something to move the needle on your business, even if it's just an inch. You've heard it before, but life is not a dress rehearsal. Don't waste your time (or mine).”

“I HEAR THERE'S A LOT OF UNHAPPINESS,” SAYS AN OBSERVER. “ARI IS HAVING TO DO A GOOD JOB OF CONVINCING KEY PEOPLE TO [STAY].”

Soon thereafter, Emanuel abruptly left ICM with a group of other agents and started Endeavor. By 1997, he could boast to The New York Times that he was making between $1 million and $2 million a year.

In 2009, Emanuel decided to take another big risk. “Nobody fucks up like I do,” he once wrote, “but you'll never succeed unless you take big risks. Big ones.” Emanuel and Patrick Whitesell—an affable, even-tempered midwesterner, whom everyone in Hollywood describes as Emanuel's polar opposite—agreed to buy the venerable William Morris agency. Founded in 1898 as a Tin Pan Alley firm to represent songwriters and vaudeville performers, it now had a vast array of show-business clients such as Eddie Murphy, Richard Gere, and Bill O'Reilly. William Morris Endeavor quickly became the No. 1 or No. 2 agency across all talent and media categories, rivaling both ICM and CAA.

“It's clear that Ari wanted to be as well respected as his other two brothers,” says entertainment-industry journalist Nikki Finke. “And he found a way to do it. And I think he's quite pleased with himself…. I think that buying Morris was a huge thing for him. Remember, Endeavor was started in the middle of the night with no money, virtually no clients.”

The late IMG owner Teddy Forstmann on the balcony of his Manhattan apartment, overlooking Central Park, in 2004. Photograph by Photograph By A. Jones/Getty Images.

Under Emanuel and Whitesell, WME has become a remarkably dominant force, especially in television. “There's nobody more important when it comes to television packaging than Ari and Rick Rosen [WME's television chief],” says entertainment mogul David Geffen. “There's nobody who does it better. For instance, Steven Spielberg was at CAA for decades, and they did nothing for him in television, and he goes with Ari, and he has had seven or eight shows on the air. That's about accomplishment, not about bullshit.”

In 2012, Silicon Valley venture capitalist Marc Andreessen introduced Emanuel to Egon Durban, managing partner of Silver Lake Partners, one of the world's most successful tech-oriented buyout firms, currently with a $10 billion equity fund and a lot of dry powder for deals. Soon enough Silver Lake made an undisclosed investment in WME, said to be $250 million, which bought it a 31 percent stake, valuing WME at around $800 million. There seemed to be little question that the WME merger worked financially, in part, according to an internal WME document, because Emanuel and Whitesell cut $50 million in costs from the combined business, turning a barely profitable firm into one with an enviable 21 percent profit margin. In 2012, WME generated a cash flow (earnings before interest, taxes, depreciation, and amortization) of $88 million, close to double that of the previous year. In 2013, the company generated $97 million in cash flow, of which more than three-quarters, or $76 million, was derived from the agency business.

The balance came from WME's controlling investments in eight new-media and other hip companies, including Red Interactive, a digital-advertising agency; Jingle Punks, a music business; and Rock Stream Studios. WME also had smaller investments in 50 or so other companies, including Uber, the hugely successful taxi alternative. It also is a founding investor in the Raine Group, a media-focused boutique investment bank and investment company started in 2009 by former Wall Street M&A bankers Jeff Sine and Joe Ravitch. Added up, the WME businesses made Emanuel one of Hollywood's leading power brokers. Acquiring IMG would make him even richer and more powerful, or such was the logic.

In 2010, Forstmann had appointed Mike Dolan IMG's chief financial officer and C.E.O.-designate. Forstmann and Dolan could not have been more different. Impulsive and passionate, Forstmann, an heir to a once proud textile fortune, flew around the world on a Gulfstream V and serially dated beautiful women, including Princess Diana, Elizabeth Hurley, and Padma Lakshmi. He never married but adopted two boys, Siya and Everest, from South Africa. For almost his entire career he worked at the eponymous firm he had started as a young man. Dolan, on the other hand, has been married to the same woman for 42 years and walked to work. He still does not own a car. He got a Ph.D. in medieval European literature at Cornell and taught at CUNY for a couple of years before getting an M.B.A. at Columbia. His subsequent résumé includes executive jobs at the consulting firm Booz Allen, Continental Can, Pepsi, the Young & Rubicam advertising agency, and Viacom.

Dolan's mandate from Forstmann had been to turn around IMG's financial performance—despite all the bravado and glamour and expansion the firm was still struggling with high expenses. Within weeks of coming to IMG, Dolan told Forstmann that the projected 2010 cash flow of $140 million was not achievable; a more realistic number was $110 million. “I thought he was going to levitate out of the chair,” Dolan recalls. Forstmann, who had a notorious temper, was enraged. “He said, ‘I'm fucking fed up with these guys, and I want you to fix it,’ ” Dolan recalls. “I said, ‘We'll fix it.’ ” Dolan cut $20 million of operating costs and another $5 million of real-estate costs. He cleaned up the company's accounting and wrote off $16 million of long-overdue receivables. He banned first-class airfare and froze salaries. The tough medicine worked. By 2011, IMG's cash flow was $150 million.

After Forstmann's death, Dolan officially became C.E.O. but quickly discovered he was not the man in charge, despite having led the company's impressive financial turnaround. Over time, much to Dolan's chagrin, that important role fell to Mark MacDougall, a litigation partner at the powerful Washington law firm Akin Gump. Before his death, Forstmann had given MacDougall power of attorney over the remaining two assets in the Forstmann Little portfolio, IMG and 24 Hour Fitness, a nationwide health-club chain. MacDougall controlled the vote—and the fate—of the 85 percent of IMG owned by a Forstmann Little limited partnership. “The general partner of Forstmann Little had all the votes on everything, and the controlling general partner was Teddy,” says someone familiar with the firm's legal structure. “It would follow that whoever stepped into his shoes would have total control.”

Forstmann had stipulated in his will that IMG be liquidated and its assets sold upon his death. The choice of MacDougall to lead that effort struck many as odd. For starters, he was a litigator, not a corporate lawyer. He had replaced Forstmann's longtime lawyer, Steve Fraiden, after Forstmann and Fraiden had a falling-out ostensibly about how to handle a lawsuit brought against Forstmann by James Agate, a former golf buddy from Los Angeles. Agate claimed Forstmann had promised to help him with his financial problems, and when he declined to do so, Agate filed an embarrassing lawsuit, revealing that Forstmann had bet as much as $7 million of his own money on IMG clients and other sporting events. At Fraiden's suggestion, according to Forstmann, Forstmann paid Agate $575,000 to disappear. But when Agate asked for more money, Forstmann decided Fraiden had given him poor advice. According to one person, Forstmann then called his old friend Bob Strauss, the Washington power broker and Akin Gump chairman, who recommended MacDougall to clean up the Agate mess.

However MacDougall got involved, one thing was certain: he was one tough lawyer who kept his own counsel. The American Lawyer once compared him to “The Cleaner,” an obvious reference to the George Clooney character in the 2007 film Michael Clayton, about a lawyer who sweeps up corporate messes. Others describe him as “a tough fuck” and a guy who “if I got arrested in Turkey for smoking dope he would be my first call.” But, according to Irving Azoff, Strauss, who has since passed away, told him, “[MacDougall] is a tough son of a bitch, and that's what Teddy needed for [the James Agate] gig, and I gave it to him…. You need to put somebody in jail, he's your guy…. I sure as fuck didn't tell Teddy to put him in charge of Forstmann Little or IMG.” (Mark MacDougall declined to comment on this characterization.)

Board Games

From the outset, MacDougall and Dolan clashed. MacDougall allegedly did not like IMG's international sports joint ventures in India, China, and Brazil, which had long been championed by Forstmann as the future of the company. Azoff says MacDougall told him, “Mike runs the joint ventures, and they're a piece of shit, so he's incompetent.” According to an insider, after Dolan traveled to Abu Dhabi, along with Jeff Sine, the Raine Group investment banker, to meet with the Mubadala Development Company, a sovereign-wealth fund, MacDougall concluded that Dolan was running around the world trying to arrange financing to buy IMG for himself. Dolan says he met with Mubadala only to raise equity to retire a portion of IMG's $700 million of debt.

MacDougall shunned not only Dolan, say insiders, but also other IMG executives who were close to him. Into this category fell the IMG controller, whom Dolan had recruited; the head of financial planning and analysis, a veteran IMG employee who knew the firm's numbers like the back of his hand; the newly hired treasurer; and the head of international taxes. Dolan says MacDougall also undermined his authority by telling him he could no longer hire or fire employees.

“IT'S CLEAR ARI WANTED TO BE AS WELL RESPECTED AS HIS TWO BROTHERS,” SAYS NIKKI FINKE.

MacDougall also alienated some on the IMG board. At this point, in addition to Azoff, the board included Google executive chairman Eric Schmidt; Johan Eliasch, the chairman of the Head Group, a sports-equipment-and-clothing manufacturer; Evelyn de Rothschild (of the famous banking family); Jerry Perenchio, the billionaire Hollywood mogul; Andy Lack, the longtime media executive; and Mellody Hobson, the president of Ariel Investments, a Chicago-based private-equity firm with close ties to President Obama. Forstmann had viewed the members of the board (which was mostly advisory, because IMG was not a public company) as his friends and collaborators, but he did not want pushback from them.

Neither did MacDougall. At no time was this more evident than during the summer of 2012, after MacDougall started the process of selling IMG, some eight months after Forstmann's death. At that meeting, the board unanimously approved the appointment of a four-member subcommittee of the board to work with management on the sales process. At the next board meeting, in the fall of 2012, Rothschild and Eliasch asked MacDougall what role he intended the full board of directors to play in the sale process. According to a board member present, MacDougall made it clear the full board was not going to be consulted about the sale.

Both Rothschild and Eliasch believed this was a usurpation of the board's fiduciary duties to the non-Forstmann shareholders, but by March 2013 they were off the board, at MacDougall's behest. Board members were “appalled at MacDougall's behavior,” according to Azoff and others. Azoff thinks MacDougall was out of control. “He got flush with power,” he says.

Through the fall of 2013, a large group of preliminary bidders was narrowed to three: WME, working with Silver Lake; CVC, the European buyout firm, working with Peter Chernin, the former News Corporation executive, who had founded his own investment firm; and the Carlyle Group, the powerful Washington private-equity firm, working with ICM. Insiders say Dolan was not allowed to speak with any of the bidders, lest he risk losing his job. Emanuel called him a number of times, wanting to meet for coffee or tea, but Dolan declined. MacDougall and his bankers told bidders that Forstmann Little wanted as much as $2.5 billion for IMG, or 12.5 times the estimated cash flow for 2013 of nearly $200 million. Final bids were due December 13. But serious questions were raised about the reliability of the company's 2013 cash-flow forecast, especially with regard to the accounting treatment of certain costs related to IMG's college-sports business. That business had been projected to generate $90 million in 2013—or nearly half of the total IMG cash flow—but it became clear to some at IMG through the course of the year, and deep into the sale process, that the actual figure was going to be closer to half that, a big miss in what was the company's most important business.

That sent IMG executives scrambling to see what could be done. According to a source familiar with the sale process, frantic calls went out to Craig Donnan, the Deloitte auditor in charge of the IMG account. According to the source, IMG wanted Deloitte to sign off on a $40 million upward adjustment in the 2013 cash flow by pushing out to future years costs and payments associated with long-term contracts between IMG and various colleges and universities. But Donnan wouldn't go for that large an adjustment and threatened not to sign off; without Deloitte's blessing, IMG likely could not have been sold. In the end, Deloitte agreed to a $21 million positive adjustment. “There were a lot of conversations [with Deloitte],” says the source. “It wasn't one day.” A near crisis had been averted. (Donnan did not respond to several requests for comment.)

On December 13, the Carlyle-ICM group and the CVC-Chernin group each bid around $2 billion. But the full amount of the CVC-Chernin bid was contingent upon IMG achieving certain financial thresholds, and the bankers quickly calculated it was worth only $1.8 billion. That left Silver Lake and WME the clear winner at $2.4 billion. “You've got to be fucking kidding me,” one of the people involved in the sale thought to himself when he saw WME's bid come in higher than he had dared hope. (Emanuel and Whitesell declined to comment for this piece.)

Azoff also could hardly believe the good fortune of IMG's shareholders. Still, he thinks the high price Emanuel paid was due just to dumb luck rather than a skillfully conducted auction process. “If you get to the finish line and you had one and a half offers out of 30 [that's a mistake],” he says. “They ran so many fucking people off with their process.”

It all worked out, he adds, because “Ari was a man on a mission.”

For his part, MacDougall, who selectively addressed issues raised by Vanity Fair, says, “The results speak for themselves. Two and a half years after we lost Ted we were able to sell IMG for $2.4 billion, to a group of enthusiastic new owners, yielding a very favorable return on the original $750 million investment. We engaged the best investment advisers we could find—Evercore and Morgan Stanley—and then let them do their job. We also received superb support from many members of the board of directors and senior management of IMG. Along the way, a very few directors and officers seemed to have different and more personal objectives for the company. If those individuals now harbor some resentment or hurt feelings because they didn't get their way, there's really not much that I can say or do about that. Ted told me that this would be a hard job and that, if I did what he was asking, I would not make any friends. I actually did make a few friends at IMG, but as was true throughout his life—Ted had it pretty much right.”

The Gold Standard

On December 18, the deal was announced. To pay for IMG, Emanuel wanted to borrow $2.45 billion of bank debt. Silver Lake and Mubadala agreed to invest $461 million of new equity, making Silver Lake the controlling shareholder of the combined company, with a 50 percent stake. Emanuel, Whitesell, and their existing WME partners would own 47 percent of the new company, and Mubadala would own the remaining 3 percent.

Emanuel could not contain his excitement at finally having his dream come true. Within days, he was making his presence felt at IMG, despite being advised to keep his distance until the deal closed. As part of his routine of making 300 or so short phone calls a day, he started calling golf executives at IMG, encouraging them to figure out ways to get his celebrity clients involved in IMG's golf events. He did a similar thing with IMG's fashion-show business. On several occasions Dolan told him to stop. “He said, ‘Mike, you're absolutely right, you're so right,’ ” Dolan recalls. “The next day, he'd do the same thing.”

In December, Egon Durban, the Silver Lake partner, hired Peter Klein, who had just ended a four-year stint as the chief financial officer at Microsoft, to be the new C.F.O. of the combined company. His first job was to arrange for the bank financing. Thanks to a robust financing market and the slick documents that trumpeted the virtues of the combined WME/IMG—prepared by JPMorgan Chase and Barclays, the lead banks arranging for the financing—Emanuel and his team easily raised the debt needed to finance the deal. According to Dolan, when he ran into Klein and asked him how the bank presentations were going, Klein told him, “They are throwing money at us.”

But the “confidential information memorandum” used to raise the bank financing had some extraordinary assumptions in it that should have received close scrutiny by the banks but apparently did not. Says one former IMG finance executive, “Banks' due diligence, let's be perfectly honest, isn't the most deep, deep thing in the world. Just remember, every mortgage was AAA-rated at one point, and they all crashed, right?”

One big question concerned the cash flow the banks were told the combined company would generate. That number was a whopping $448 million—some 88 percent more than the $238 million sum the two companies had reported for 2013. The projection contained a number of onetime adjustments and add-backs of expenses that had occurred in previous years.

Mark McCormack making a deal, February 23, 1970. Photograph By Tom Stockill/Camera Press/Redux.

The $448 million was also based on Emanuel and Whitesell's finding $156 million in cost savings at the combined company, $151 million of which was to come from IMG. Not that they were consulted, but top IMG management thought this figure fanciful at best, given the costs that Dolan and others had already taken out of the company in previous years. The former IMG finance executive put at $60 million the realistic cost savings that could come from the WME/IMG merger.

In a business where the primary assets are people and their relationships with other people—it's not as if IMG manufactured anything—the promise of cost cuts sent shivers through the rank and file. According to Azoff, Emanuel called about 30 top IMG executives and told them not to worry about the proposed cuts. “Don't anybody be afraid,” Azoff says Emanuel told them. (A WME spokesman denies that Emanuel had these conversations.)

In March 2014, Peter Klein reached out to top IMG management for help. “By now, the penny has dropped, and he's begun to figure things out…. I think it became clear to Peter that the numbers were a joke,” one former executive recalls. He believes Klein had come to the dual realizations that it was unlikely the $151 million of cost reductions could be found at IMG and that IMG's college-sports business was in free fall because the colleges and universities wanted more money for the rights that allowed IMG to sell local advertising and branded merchandise. (Klein disputes this account. He says he believed the numbers would be achieved.)

WME closed the IMG deal in early May. The $2.45 billion bank deal was a blowout, many times oversubscribed. “We're ready to get started on what will surely be an epic collaboration,” Emanuel and Whitesell wrote to the more than 3,000 employees worldwide. Emanuel called Dolan, and the two men congratulated each other. Dolan had no intention of staying at the new company—he had seen the writing on the wall—and was sticking around to collect what turned out to be a $40 million payday from his ownership of IMG stock. He and Emanuel exchanged pleasantries and agreed to get together for a drink later in the week, when Emanuel planned to be in New York. “Anything you ever want, Mike, anything you ever want, just call me and Patrick,” Emanuel told him. “You've got it.” Dolan says now, “It was all Hollywood bullshit.”

YOU'VE GOT TO BE KIDDING ME, ONE PERSON INVOLVED IN THE SALE THOUGHT WHEN HE SAW EMANUEL'S BID.

A few days later, Dolan flew to Bermuda to attend a board meeting for Bacardi Ltd., the family-owned spirits company. (Dolan is now the C.E.O. of Bacardi.) After he arrived, his assistant told him a confidential package had arrived for him from WME/IMG human resources. Emanuel had fired him. “I was just sitting there waiting to collect a check from the sale of the company,” he says. “And he still didn't have the balls to say, ‘You know what, Mike? It's not going to work out, and we wish you well.’ ” A day later, Dolan's assistant was fired, and then, seriatim, those IMG executives who were close to Dolan.

That was only the beginning of the bloodletting. In July, Peter Klein quit for personal reasons, as he wrote in an e-mail to VANITY FAIR. But, a former IMG executive theorizes, “Peter knew that he was set up to take the fall…. He realized the college numbers were bullshit. The $155 [million of cost savings] was bullshit.” A few weeks later, David Abrutyn, IMG's global head of consulting, announced he would be leaving, followed by Constance Williams, the former head of human resources, and, more important, George Pyne, the head of IMG's college business, who left to form his own company. One former IMG executive told the entertainment blog the Wrap, “It's like watching a slow-motion car crash.”

Around the same time, problems with IMG's college-sports business began to seep into public view. According to someone at a presentation to the banks, Pyne had predicted that it would generate $100 million in cash flow in 2014. “If we do $100 million in 2014, it would be the lowest year we've ever had in college,” Pyne is said to have proclaimed to the banks. But in June, the new company lost a premier multi-million-dollar licensing-and-local-media contract with the University of Kentucky to a rival agency. Then it almost lost its deal with Syracuse University. Only through Whitesell's direct intervention was the contract salvaged. But, according to a former IMG executive, where once IMG had paid Syracuse $3.9 million a year and made around $2.5 million in profit, the new contract called for paying Syracuse $6 million a year and was unprofitable. Then IMG lost its contract with Arizona State and a portion of its contract with the University of Georgia. The wheels were coming off IMG's college business. (A WME/IMG spokesman says it's “only fair to state the wins [for the company] in the last five to six months”: Nebraska, Baylor, and Western Kentucky.)

Former IMG C.E.O. and current Bacardi C.E.O. Mike Dolan in 2012. Photograph By Tom Stockill/Camera Press/Redux

The promised cost-cutting was also running into trouble, in part because Emanuel found himself having to make expensive new hires to compensate for the wave of departing IMG executives. To replace Klein, WME/IMG hired Chris Liddell, a onetime IMG board member whom Forstmann had removed as part of the failed alleged Ovitz coup. As a former chief financial officer of both General Motors and Microsoft, Liddell had the credentials for the job, but many wondered why he had taken it unless his ultimate goal—and that of Silver Lake—was to replace Emanuel and Whitesell as the C.E.O. “Liddell has said a dozen times, ‘I'm done with the C.F.O. stuff. I'll never do it again,’ ” says one former IMG insider. “He's not there to be C.F.O. He's there for a year from now, when Ari and Patrick can't come anywhere close to their numbers.” (A WME spokesman says this allegation is untrue. The company did not make Liddell available for comment.)

Some former IMG executives think it is just a matter of time before the banks learn of the magnitude of the missed projections of the college-sports business as well as the presumed failure to achieve the $150-million-plus in cost savings. The full-year 2014 WME/IMG financial performance will likely be shared with the bank group sometime in March 2015, if not before.

Answered Prayers

Leon Black's Apollo Global Management, a notoriously successful distressed investor, is said to be circling the WME/IMG bank debt to see if it can buy into the company on the cheap. Moody's, the giant debt-rating agency, assigned the WME/IMG debt a “speculative” rating, implying that owning the debt was a risky proposition. In a report, Moody's analyst Scott Van den Bosch argued that the company's leverage was “very high” and that there were serious risks involved with integrating the two companies and achieving the projected cost savings. “Failure to achieve substantial cost savings or revenue growth that lead to leverage levels remaining above 7x by the end of 2015 would likely lead to a downgrade,” he wrote. (To try to make good on the promised cost savings, in December, IMG cut 100 low-level jobs.) But Wall Street bankers say the value of the WME/IMG bank debt seems to be holding up relatively well in secondary-market trading, indicating that worries about the company's financial performance may be overblown.

“HE IS RELENTLESS TO THE POINT OF ‘ARI, STOP CALLING ME. I'LL MAKE MY DECISION WHEN I MAKE MY DECISION,’ ” SAYS LES MOONVES.

For his part, Emanuel is undeterred. In 2014, according to a competitor, he asked many WME agents to take more equity in the new company in lieu of a portion of their bonuses. His promise to them is that when WME/IMG goes public they will be rich. But with the equity markets again looking shaky after a long upward run, that promise could be a hollow one, or the money a long way off, especially if the promised financial performance is not achieved. “I hear there's a lot of unhappiness,” says a veteran Hollywood observer. “Ari is having to do a good job of convincing their key people to hang in there for another couple of years, and all they keep saying is ‘I.P.O., I.P.O., I.P.O., and look at all the stock you have, and you'll make eight figures when we go public, and you're never going to make that money as an agent anywhere else in a onetime liquidity event, so hang in there until we get to go public.’ ” (Aside from press speculation, there is no indication the company is planning a public stock offering anytime soon.)

Flush with cash from the Skype and Alibaba deals, Silver Lake could always invest more equity in the company until the business and the markets improve, although this might mean a dilution of Emanuel's and Whitesell's ownership stakes. Durban, the Silver Lake partner, could not disagree more emphatically with the critics who say WME/IMG is not meeting its projections. He says the company's financial performance will exceed what was forecast. Although the numbers aren't publicly available, Silver Lake shared with VANITY FAIR that the WME/IMG cash flow for the first nine months of 2014 was around $200 million, some 16 percent above the same time period for 2103. (Durban declined to comment.) In November, Durban told the Financial Times that WME/IMG would be one of Silver Lake's “highest returning investments” and that the new company was “one of the fastest growing media companies in the world at scale.” He said that WME/IMG had no material debt maturities until 2021 and that the combined company's $315 million in cash flow in the 12 months ending in June would easily cover its $95 million in annual interest payments to the banks. He explained that the combined size of WME/IMG gives it power in the marketplace. “It reminds me of when I graduated from college and worked at Morgan Stanley,” he told the Financial Times. “Then there was consolidation: banks had to become full service and got larger and larger…. Instead of having to pitch clients, clients would call them and give them business…. Through the course of the year we've had a significant acceleration of talent representation flow our way because of our scale.” He remains, he says, deeply committed to Emanuel and Whitesell and the company they have built. “This is a business that has been around for 100 years,” he said. “We're not in a rush.”

It's a good thing Durban is favorably disposed toward these two executives, since Emanuel and Whitesell have a 10-year employment agreement with the company and, as both Azoff and Geffen contend, have the right to sell their stock to Silver Lake, at an agreed-upon price, whether or not WME/IMG becomes a public company. “One way or the other they get bought out,” Geffen says of Emanuel and Whitesell. (A WME/IMG spokesman says Emanuel and Whitesell do not have a pre-arranged agreement to sell their stock to Silver Lake.)

James B. “Jimmy” Lee, Silver Lake's longtime banker at JPMorgan Chase, is equally bullish about the future prospects of WME/IMG. He says that no company Silver Lake owns has ever defaulted on a covenant and that, furthermore, it over-capitalizes the companies it invests in to make sure there are no financial problems at the start or down the road. Speaking hypothetically about deals where two companies are merged and where integration and cost rationalization happen over time, Lee says, “When you do deals like this and you've got a lot of work to do on the business, it's not like they bought something that was running like a watch. You make a series of big assumptions and then what happens, over, call it 24 months or so, is some assumptions are dead right, some assumptions are dead wrong. But in the aggregate you end up with exactly what you had planned on, more or less.”

Emanuel's Hollywood friends and associates are also optimistic and supportive. HBO chairman and C.E.O. Richard Plepler, who admits he doesn't know much about the WME/IMG deal, says, “Ari is the personification of positive energy. If he told me that the sun was going to rise in the west, you know, I might not believe him, but I'd set my alarm. And I'd set my alarm because his enthusiasm is such, his faith in the promise of something is such, that you want to go with him. I wouldn't bet against him.”

Nikki Finke is similarly enthusiastic: “Ari wants to grow his business, and I think that is what motivates him. He wants to grow it so that it is a fixture in Hollywood and out of Hollywood, so that it is impermeable. He saw when he was small how vulnerable these agencies are to the ebb and flow of the business. And he wants to create a company that is way beyond that…. He wants a fortress. He wants moats, and walls—everything. And it's really smart, and he's expanding in lots of different ways. And he'll get there. I have no doubt that he will get there.”

David Geffen recalls being in a situation similar to the one Emanuel is now in. “Time will tell whether he overpaid for [IMG],” he says. “I'm sure his competitors will say he overpaid. I don't think that means anything. I remember when I sold Geffen Records to MCA: everybody in town was saying how I took them to the cleaners. It wasn't so, and it turned out not to be so. They made a fortune on that deal. It requires time to be able to look in retrospect as to whether a good deal or a bad deal was made…. The conventional wisdom at the moment isn't necessarily wisdom.”

“Was [the IMG deal] good for William Morris and good for Ari and Patrick?” Geffen asks. “Yes. Big-time good. It gives them a path to liquidity because it’s going to be a public company. It gives them an opportunity to cash out their investment to some degree. Which is important for all of them.”